India's 'Whisky Galore' dream for Scotch
Whisky's biggest market still imposes 150% tariffs on foreign spirits...
DEPENDING on your definition, India is the thirstiest whisky-drinking nation on earth, writes Tom Bruce-Gardyne for WhiskyInvestDirect.
The vast majority of Indian whisky is locally produced, using molasses and therefore basically rum. But in name it is whisky and much of it aspires to be Scotch.
Led by multi-million case sellers like McDowells, Royal Stag and Bagpiper, the category takes its cues from 'Whisky Galore!' and the days of the Raj, even if most Indian brands were created in the last forty years. Genuine Scotch whisky, meanwhile, barely penetrates the Indian market.
Officially, Scotch used to exist only in duty free and five-star hotels, though plenty more seeped in across India's 4,000-mile coastline or through foreign embassies and airline staff. Then in 2001 India abandoned quotas for a dizzying array of State and federal taxes, starting with import tariffs of over 500%.
Today, after sustained pressure from the World Trade Organization, the tariff has been reduced to a merely eye-watering 152%. So for most Indians, Scotch whisky remains tantalisingly out of reach.
Protectionist, bureaucratic and not a little corrupt, there is much to despair about India for the Scotch whisky industry. Discussions with the Indian government over reducing taxes to create a level playing field for imported spirits are decades old and littered with broken promises. Plus, even if import tariffs do come down, there is a strong possibility some States will simply raise local taxes to make up the difference.
Despite this experience, it's hard for the Scotch industry not to be seduced again by the dream of accessing India's whisky market. Its sheer scale, plus pent-up demand for Scotch, is only growing as India's middle class expands.
Annual whisky sales in India are estimated at over 180 million cases, of which Scotch accounts for just 1.9m whether bottled in India (like Teacher's and 100 Pipers) or in Scotland (like Johnnie Walker and Ballantine's). Total shipments are considerably higher, however, thanks to a little Scotch being dribbled into Indian whiskies for added cachet and price. According to the Scotch Whisky Association, exports equated to 6.5m cases last year, up 30% on 2013 and over 300% in five years. During that period the value has leapt from £27.7 million to £88.7m.
At retail, the first step on India's whisky ladder beyond moonshine or 'country liquor' starts at 150 Rupees (some £1.50). Above stretches a profusion of sub-categories as elaborate as the country's caste system. Most of the volume, some 110m cases, is among 'Regular' and 'Semi Premium' whiskies at around Rs500 (£5.10) a bottle. Proudly at the top of the pyramid is Scotch whisky with prices starting at Rs1,200 (£12.30) and rising steeply. Once consumed, bottles of Johnnie Walker Black Label meantime move in the opposite direction in a very Indian food chain. Because the empties are bought by bottle wallahs, who fill them with bulk Scotch and sell them on. The quality of spirit declines with each refilling, until you hit Punjabi rocket fuel and the label falls off.
Smuggling and counterfeiting are big issues in India, yet serve to prove Scotch whisky's high status. Vijay Mallya, the self-styled 'King of Good Times' and chairman of the mighty United Spirits, predicts India will become the drink's biggest market. That's not impossible given current growth rates and the fact even domestic distillers are lobbying for a cut in import tariffs.
But it won't happen overnight, and it probably won't happen with Mallya at the head of United Spirits. His board has been trying to unseat him since April – for alleged financial irregularities.
Award-winning drinks columnist and author Tom Bruce-Gardyne began his career in the wine trade, managing exports for a major Sicilian producer. Now freelance for 20 years, Tom has been a weekly columnist for The Herald and his books include The Scotch Whisky Book and most recently Scotch Whisky Treasures.
You can read more comment and analysis on the Scotch whisky industry by clicking on Whisky News.